Regulator and Regulated

The relationship between the regulator and the regulated was evolving, some time ago, as I discovered when researching and writing my doctoral dissertation (1993). Major issue: what are the limits of regulatory discretion, particularly regulatory discretion to not enforce the law? In terms of contemporary developments, what are the implications for “zero tolerance” policies in relation to regulatory enforcement?

This being extracted from Chapter 10: “The Relationship Between The Regulator and The Regulated”:

The regulator will always look like an ox playing tag with a gazelle.

Best and Shortell (1985: 339)

In (the Inspector General of Banks’) appearances before the Senate Banking Committee on revisions to the Bank Act, it was sometimes hard to figure out whether he was speaking about the banks or on behalf of the banks.

Stewart (1982: 160)

In the regulation of Canadian financial institutions, compliance strategies would appear to predominate, primarily through the use of “businessperson’s agreements” between the regulator and the regulated. A compliance strategy underscores the elements of trust and confidence in the relationship between the financial institution regulator and regulated. Such a strategy also is supported by the history of Canadian financial institution regulation. The Office of The Inspector General of Banks was established in l923, at which time the role of the Office was described in Parliament as one of obtaining information “from studying reports of the (internal) inspectors of banks, the credit information files and also the reports of the shareholders’ auditors” (Estey, l986: 154). In addition, in a l964 comprehensive review of the Canadian banking system, the Porter Commission recommended that the Office of the Inspector General of Banks should rely significantly on self-regulation by banks and should continue to rely on external auditors (Estey, 1986: 155).

Stone’s (1975) study of the regulation of corporate behaviour was titled Where Law Ends, the title of which is assumed to be based on an inscribed statement of William Pitt, found on the Department of Justice Building in Washington:

Engraved in stone on the Department of Justice Building in Washington, on the Pennsylvania Avenue side where swarms of bureaucrats and others pass by, are these five words: “Where law ends tyranny begins”.

Davis (1969 [l979: 3]).

Discretionary actions include discretion not to enforce the law–“where law ends”:

While no arrests were made during the hour-long demonstration attended by about two dozen Ottawa Police and RCMP officers, police said charges can still be laid if there are complaints. “We’re trying to de-escalate (the situation),” said Ottawa police Insp. Patrick Moyle. “We don’t want to raise emotions–it’s not like (baring breasts) is a violent crime.”

Chamberlain (1992), reporting police reactions to an Ottawa demonstration challenging public indecency laws, held on the steps of the Parliament of Canada before estimated crowd of 6,000.

About a dozen women marched bare-breasted through downtown Montreal yesterday to protest against what they regard as the inequity of a federal law that can see a woman fined and jailed for taking off her top in public, while a man who does the same can fear no more than being handed a brochure to a fitness club. …By the time the march was over, six women were arrested and facing charges of having committed an indecent act, the law they were protesting against… …the long arm of the law…did not reach out to collar anyone until a few dozen of the 200 or so protesters repeatedly refused a police request that they cover up before entering (a public) park because of the presence of families and children. “What? Are you saying there were no children on Ste. Catherine St.?” (a major Montreal thoroughfare, which was part of the protest route) asked one marcher. “I’m just saying you have to cover up before you go into the park,” said Lt. Mario Darcy of Station 25. Since logic is a discipline, not a law, police don’t have to worry about it.

Mennie (1992), reporting arrests at a similar demonstration in Montreal.

…(if) a bank ends up with a difficult portfolio, a portfolio that is full of trouble, there is no magic that will make it disappear. You either write it off in an orderly way or you work with the companies involved in the hopes that the workout arrangements will salvage value and will restore the bank to health, and that is where we were.

Testimony of William Kennett, Inspector General of Banks, at the Estey Inquiry, with respect to actions of the Office of the Inspector General concerning the Canadian Commercial Bank (as reported by Estey, 1986: 459).

Compromise, negotiation, trust and confidence in the relationship between the regulator and the regulated are supportable, provided that the bases for trust have not been eroded and the objectivity of the regulator is unimpaired.

References

Best, Patricia, and Ann Shortell
1985 A Matter of Trust: Power and Privilege in Canada’s Trust Companies. Markham, ON: Penguin Books Canada Limited.

Chamberlain, S.
1992 Frontal assault on the Hill. The Ottawa Sun, July 20: 4-5.

Davis, K.C.
1969 Discretionary Justice: A Preliminary Inquiry. New Orleans, LA: Louisiana State University Press, l969. Chicago, IL: University of Illinois Press, Fifth Printing, l979

Estey, Hon. W.Z.
1986 Report of The Inquiry Into The Collapse of The CCB (sic) and Northland Bank. Ottawa: Supply and Services Canada.

Mennie, J.
1992 Baring anger against `sexist’ law. The Montreal Gazette, July 20: A3.

Stewart, W.
1982 Towers of Gold, Feet of Clay: The Canadian Banks. Toronto, ON: Collins Publishers.

Stone, C.D.
1975 Where the Law Ends: The Social Control of Corporate Behavior. New York, NY: Harper & Row, Publishers, Inc..

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About brucelarochelle

http://www.lmslawyers.com/bruce-la-rochelle
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